CANADA FX DEBT-Canadian dollar steadies ahead of BoC interest rate decision

By Fergal Smith

TORONTO, Dec 9 (Reuters) - The Canadian dollar steadied against its U.S. counterpart on Tuesday as oil prices fell and investors awaited a Bank of Canada interest rate decision.

The loonie CAD= was trading nearly unchanged at 1.3850 per U.S. dollar, or 72.20 U.S. cents, after trading in a range of 1.3824 to 1.3860. On Monday, the currency touched an 11-week intraday high at 1.3797.

The Bank of Canada is expected on Wednesday to leave interest rates on hold after lowering the benchmark rate to a three-year low of 2.25% in October. Investors are betting that the central bank will shift to raising rates in 2026 after recent data showed the economy adding many more jobs than expected.

The Federal Reserve is also due to make an interest rate decision on Wednesday. Investors expect a rate cut and additional easing next year.

"It would require considerable conviction for the Bank of Canada to tighten while the Federal Reserve is still easing," Karl Schamotta, chief market strategist at Corpay, said in a note. "But any move in that direction would almost certainly trigger a sharp appreciation in the Canadian dollar."

The price of oil CLc1, one of Canada's major exports, was trading 1.2% lower at $58.17 a barrel as investors kept a close eye on peace talks to end Russia's war in Ukraine.

Microsoft said it would invest more than C$7.5 billion ($5.42 billion) in Canada over the next two years, with new cloud capacity under the investment slated to come online in the second half of 2026. The move was part of its total planned Canada spending of C$19 billion between 2023 and 2027.

Canadian bond yields moved higher across the curve. The 10-year CA10YT=RR was up 3.4 basis points at 3.458%, but held below the three-month high of 3.500% it touched during Monday's session.